New Plays, Wednesday, 01/30/2008

New Option Plays

by James Brown

New Calls

None today.

New Puts

Hartford Fincl. - HIG - cls: 78.55 chg: -0.87 stop: 81.75

Why We Like It:
We added HIG to the play list as a put candidate on Sunday but we were a couple
of days early. The stock spike higher and hit our stop loss this afternoon as
the market rallied on the fed news. However, the market, and HIG, reversed again
before the closing bell. This looks like a new entry point for puts. We're
putting the stop loss just above today's high. We have two targets. Our first
target is the $75.15-75.00 range. Our second target is the $71.00-70.00 range.

Why We Like It:
TFX is another candidate from the Sunday newsletter that hit our stop this
afternoon following the fed decision on interest rates. Today's late day bearish
reversal and failed rally under the 50-dma looks like another entry point to try
again. We're suggesting a stop loss at $60.01 but you could try a stop at $59.21
just above today's high. Our target is the $54.00-52.50 zone.

New Strangles

Google - GOOG - close: 548.27 chg: -2.25 stop: n/a

Company Description:
Google's innovative search technologies connect millions of people around the
world with information every day. Founded in 1998 by Stanford Ph.D. students
Larry Page and Sergey Brin, Google today is a top web property in all major
global markets. Google's targeted advertising program provides businesses of all
sizes with measurable results, while enhancing the overall web experience for
users. Google is headquartered in Silicon Valley with offices throughout the
Americas, Europe and
Asia. (source: company press release or website)

Why We Like It:
GOOG is set to report earnings after the closing bell tomorrow, January 31st.
Expectations have come down quite a bit. In addition to market weakness there
have been multiple analyst firms issue cautious or bearish comments about GOOG's
earnings report due tomorrow and this has contributed to the stock's sell-off.
If these analysts are right and GOOG has negative news then the stock could
really crash in this environment. If they're wrong and GOOG really surpasses
expectations or comes
out with some new exciting product then there could be a
big rush higher. Shares closed right near the $550 level, which offers a great
opportunity for a neutral strategy. A straddle is too expensive. Buying both a
$550 call and $550 put would cost $51.50. GOOG would have to move more than $52
and before we came close to making any money. However, if we buy a strangle and
GOOG moves $50, which it could easily do, then we have a greater chance of
making a profit. Our biggest risk
is that GOOG merely bounces around the
$525-575 zone and doesn't see any big directional moves. Fortunately, the stock
has a stronger history of big post-earnings volatility.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money
put option. It's a neutral strategy. We don't care what direction the equity
moves as long as it moves big. We're suggesting the February options. Our
estimated cost is $17.00. We want to sell if either option hits $27.00 or more.